Unemployment and inflation

3 types of unemployment

cycical, frictional, seasonal, Structural

2 Types of inflation

demand pull and cost push

demand-pull inflation

caused by increasing demand, exceeding the current level of goods and services. (shortage)

cost-push inflation

Caused by an increase in the cost of producing goods and services. (meaning customers pay more)

Causes of Cost-push inflation:

• Increased wages larger than productivity
• Increased company tax
• Increased cost of machinery
• Increased cost of oil / petrol
• Natural disasters

Causes of Demand-pull inflation

• Increased government spending
• Rising income
• Upswing / Boom (business cycle phase)

Effects of Inflation

Decreases purchasing power, affects low income (Y) earners more & makes interest rates rise

Inflation

The persistent and appreciable rise in general level of prices over time.

Unemployment

Those who are both willing and able to work but cannot find a job.

Unemployment - Cyclical

•When the business cycle is in a downturn or trough, the demand for goods and services falls.
•As profits fall, businesses will cut production costs; which includes employees - these employees become unemployed.
•is sometimes referred to as 'demand deficient' unemployment.
•duration of the unemployment period depends on the recovery of the economy

• It is unvolnutary

Unemployment - Structural

•Production methods change, leading to a mismatch of skills; that is, the skills are outdated and are not transferrable to the new production methods.
•Retraining or upskilling of workers is required in order to address structural unemployment

Unemployment - frictional

•Refers to people who have willingly left their job before finding another
•People might leave their job to find higher paying work or to find a job that better suits their skills
•Frictional unemployment is voluntary and is usually higher during upswings or booms.

Unemployment - Seasonal

•Occurs because the demand for certain types of employees changes in according to the season/time of year.

(statistic) Lowest unemployment rate in recent times ->

3.4% in october 2022 (australian government was recovering from COVID)

Effects of Unemployment on the Individual:

• Reduced purchasing power
• Less income
• ^Financial stress

Effects of Unemployment on the Community:

• higher crime rates, poverty, less spending on wants

Effects of Unemployment on the Economy as a whole:

• Low consumer confidence
• Stagnant economic growth (economic decline even)
• lower inflation

Real life example: Cyclical unemployment

In April 2023, Australia's unemployment rate rose to 3.7%, up from 3.5% the previous month, marking an increase of 18,400 unemployed individuals. (Source ABC news)

Real life example: Frictional Unemployment

in 2023 there was a growing number of young people across Europe voluntarily leaving their jobs, driven by dissatisfaction with traditional employment structures, mental health challenges, and a desire for more meaningful and flexible work environments. (Source Yahoo news)

Statistic - inflation rate

december 2022, inflation annual change of 7.8%

Extended response structure:

Introduction -> define main term then answer Q
BP1 (SEE)
BP2 (SEE)
BP3 (SEE)
Conclusion

(free card)

demand = good (pulls you in)

cost = bad (pushes you away

Real life example: Structural unemployment

In 2024 Ai voice clones wiped out jobs for 5000 australian voice actors. (the guardian)